Parents will gain great peach of mind if they take the time to plan for their child's future while they still have the health, time, and energy to do so. Planning is more than just having a will and special needs trust. It is working with the agencies within the community where the child will live to ensure that proper supports are in place.
One important step is to ensure that all assets are kept out of your child's name (including assets left in a will) so the child can maintain financial eligibility for Medicaid and SSI. Currently, assets of just $2000 in your child's name will make them ineligible for SSI.
Assets can be kept and/or willed for your child's benefit (but kept out of their name) via a Special Needs Trust. Be sure to tell extended family, such as grandparents, not to will assets directly in your child's name.
SPECIAL NEEDS TRUST
A Special Needs Trust is a special kind of trust that holds title to property for the benefit of a child or adult who has a disability. The Special Needs Trust can be used to provide for the needs of a person with disablilities to supplement benefits received from various governmental assistance programs. A trust can hold cash, personal property, or real property, or can be the beneficiary of life insurance proceeds
Special needs refers to the necessities for maintaining the comfort and happiness of a person with disabilities, when such necessities are not being provided by any public or private agency. Special needs can include (but are not limited to):
- medical and dental expenses, and annual independent check-ups
- programs of training
- treatment, and rehabilitation
- eye glasses
- transportation (including vehicle purchase)
- essential dietary needs
Special Needs Trusts may also include items such as spending money, electronic equipment (such as radios, CD players, television sets, and computer equipment) vacations, entertainment, money to purchase appropriate gifts for relatives and friends, and other items to enhance self-esteem.
Parents (or other family members) of a child with disabilities can establish a Special Needs Trust as part of their general estate plan. You can route the child's share of the estate into this trust and not worry that your child will be prevented from receiving benefits when you are not there to care for him/her.
A disabled person who expects an inheritance or other large sum of money may also establish a Special Needs Trust. Receiving these funds might otherwise disqualify them from public benefits. In many situations, a trust can also be established after the person with disabilities has received an extraordinary amount of money, though a court order may be necessary.
To learn more about Special Needs Trusts and the asset restrictions on individuals with disabilities, contact an Estate Planner knowledgeable in Special Needs Trusts in your area. You can also review these resources:
- Futures Planning for Families Supporting Adults with Life Long Disabilities
- Special Needs Trusts Ensure Support, Care
- The Importance of Special Needs Planning
ABLE Accounts, which are tax-advantaged savings accounts for individuals with disabilities and their families, were created as a result of the passage of the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014 or better known as the ABLE Act. The legislation explains further that an ABLE account will, with private savings, “secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, Medicaid, SSI, the beneficiary’s employment and other sources.” The beneficiary of the account is the account owner, and income earned by the accounts will not be taxed.
An ABLE Account will provide more choice and control for the beneficiary and family. The cost of establishing an account will likely be considerably less than either a Special Needs Trust (SNT) or Pooled Income Trust. With an ABLE account, account owners will have the ability to control their funds and, if circumstances change, still have other options available to them. Determining which option is the most appropriate will depend upon individual circumstances. For many families, the ABLE account will be a significant and viable option in addition to, rather than instead of, a Trust program.
There are limits to how much can be put in an ABLE account, and other nuances that are important to be aware of. For more information, visit these helpful resources:
- ABLE National Resource Center
- ABLE Accounts: A Savings Opportunity for Qualified Individuals with Disabilities
- SSA Spotlight: ABLE Accounts
You can read more about related government assistance programs at Social Security Online: Disability Programs.